United States v. Schwerdtfeger Dairy Farm

UNITED STATES OF AMERICA, Plaintiff/Counterdefendant,v.SCHWERDTFEGER DAIRY FARM, Defendant, and HOWARD M. SCHWERDTFEGER and ROBERT A. SCHWERDTFEGER, Defendants/Counterclaimants.

MEMORANDUM AND ORDER

J.
PHIL GILBERT, DISTRICT JUDGE

This
matter is before the Court on the motions to dismiss filed by
defendants Howard M. Schwerdtfeger (“Howard”) and
Robert A. Schwerdtfeger (“Robert”) (Docs. 49
& 50). The Court construes these motions as pursuant to
Federal Rule of Civil Procedure 12(b)(6). The United States
(“Government”) has responded to these motions
(Doc. 53), and the Schwerdtfegers have replied to that
response (Docs. 54 & 55).

BACKGROUND

In
March 2005, the Government instituted foreclosure proceedings
against Schwerdtfeger Dairy Farm (“the Farm”),
Howard, Robert and another party. See United States v.
Schwerdtfeger Dairy Farm, No. 05-cv-4051-JPG-DGW. In its
complaint for foreclosure, the Government claimed the
defendants had been in default of their various loan
obligations and the loans were therefore subject to
foreclosure under the terms of the security agreements
entered between the defendants and certain federal government
agencies. The loans received by the defendants were secured
by real property (including the Farm) and by various
farm-related personal property. Shortly before an evidentiary
hearing on the matter, the Government asked the Court to stay
the case or dismiss it without prejudice because the loaning
agency had reopened for further review several civil rights
complaints by the Schwerdtfegers concerning their loans. The
Court dismissed the case without prejudice in March 2007.

In June
2009, Robert sought judicial review of the December 2008
Department of Agriculture (“USDA”) final decision
dismissing his 1994 administrative complaint. See
Schwerdtfeger v. Vilsack, No. 09-cv-429-MJR-SCW. In
April 2011, the Court granted the Secretary of
Agriculture's motion to dismiss or, in the alternative,
for summary judgment and entered judgment against Robert.
Robert appealed that decision, but voluntarily dismissed the
appeal in July 2011.

In
March 2016, the Government refiled the foreclosure matter as
the currently pending case, this time naming only the Farm,
Howard and Robert as defendants. The Government claims that
the defendants have defaulted on their loan obligations, not
having made any loan payments since the account was
accelerated in August 1994, and that it is entitled to a
judgment of foreclosure. The Farm has been defaulted for
failure to plead or otherwise defend (Doc. 38).

Howard
and Robert now ask the Court to dismiss the case against them
for failure to state a claim. They argue that the debt has
expired because, according to the Government, they stopped
making payments in or before August 1994. They believe this
2016 case should therefore be dismissed based on the statute
of limitations and the equitable doctrine of laches. They
complain that the USDA mishandled Robert's civil rights
administrative complaints and that the Government erred in
bringing and then aborting the 2005 foreclosure action. They
assert that in the 2005 foreclosure action the Government was
not forthright in revealing the status of Robert's
administrative complaint and that they have been prejudiced
by the USDA's misconduct and the delay in the foreclosure
proceedings. They argue that the Government is bringing this
action to avoid a “Major Washington Scandal”
within the USDA involving misconduct, neglect and corruption
and that they are victims caught in the middle of an
intra-agency dispute. They further suggest the institution of
this foreclosure action was in retaliation for their
administrative complaints. Finally, they reiterate their
long-standing complaints with the way the Government issued
their loans in 1976.

In its
response, the Government argues that there is no statute of
limitations for an in rem proceeding. While there is
a statute of limitations for a Government action seeking
money damages such as personal deficiency judgment, that
limitations period does not apply because the Government does
not seek such a judgment in this case. The Government further
argues that the equitable doctrine of laches should not apply
because the delay in bringing this action was not
unreasonable and because the Schwerdtfegers were not
prejudiced by that delay. Finally, the Government denies the
Schwerdtfegers' allegations of scandal and misconduct in
the USDA.

ANALYSIS

When
reviewing a Rule 12(b)(6) motion to dismiss, the Court
accepts as true all allegations in the complaint.
Erickson v. Pardus, 551 U.S. 89, 94 (2007) (citing
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555
(2007)). To avoid dismissal under Rule 12(b)(6) for failure
to state a claim, a complaint must contain a “short and
plain statement of the claim showing that the pleader is
entitled to relief.” Fed.R.Civ.P. 8(a)(2). This
requirement is satisfied if the complaint (1) describes the
claim in sufficient detail to give the defendant fair notice
of what the claim is and the grounds upon which it rests and
(2) plausibly suggests that the plaintiff has a right to
relief above a speculative level. Bell Atl., 550
U.S. at 555; see Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009); EEOC v. Concentra Health Servs., 496
F.3d 773, 776 (7th Cir. 2007).

This
standard, however, will not prevent dismissal of a complaint
that pleads too much. A case can be dismissed because a
complaint pleads facts establishing that the defendant is
entitled to prevail. Bennett v. Schmidt, 153 F.3d
516, 519 (7th Cir. 1998); Soo Line R.R. Co. v. St. Louis
S.W. Ry., 125 F.3d 481, 483 (7th Cir. 1997); see
Hecker v. Deere & Co., 556 F.3d 575, 588 (7th Cir.
2009) (dismissal appropriate when party pleads facts
establishing defense to his claim). However,
“[d]ismissing a complaint as untimely at the pleading
stage is an unusual step, since a complaint need not
anticipate and overcome affirmative defenses, such as the
statute of limitations. “ Cancer Found., Inc. v.
Cerberus Capital Mgmt., LP, 559 F.3d 671, 674 (7th Cir.
2009). The Schwerdtfegers argue the Government has pled
itself out of court by alleging facts that establish its case
is too stale to proceed now.

As a
preliminary matter, both parties have attached to their
filings matters not included in the Government's
pleading. Ordinarily, when such material is presented in
connection with a Rule 12(b)(6) motion to dismiss, the Court
may not consider the material unless it converts the motion
into a motion for summary judgment and gives the parties fair
warning that it is doing so and an opportunity to respond.
See Fed. R. Civ. P. 12(d). There is an exception to
this rule, however, when the additional material is something
of which the Court may take judicial notice, such as judicial
proceedings, see Henson v. CSC Credit Services, 29
F.3d 280, 284 (7th Cir. 1994). In this case, the Court will
consider prior judicial proceedings involving the
Schwerdtfegers' loans. However, it declines to consider
the other additional materials attached to the filings and
will consider this motion under Rule 12(b)(6).

The
Complaint does not establish that the statute of limitations
or the doctrine of laches bars this action for foreclosure.
It is a fundamental principle of law that the Government is
not bound by a statute of limitations unless Congress clearly
intends it to be. United States v. Insley, 130 U.S.
263, 265-66 (1889). The is because, as a matter of public
policy, the public interest should not be prejudiced because
of the negligence of Government officers unless Congress so
intends:

It is settled beyond doubt or controversy - upon the
foundation of the great principle of public policy,
applicable to all governments alike, which forbids that the
public interests should be prejudiced by the negligence of
the officers or agents to whose care they are confided - that
the United States, asserting rights vested in them as a
sovereign government, are not bound by any statute of
...

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